Zynga, which practically invented the notion of using Facebook as a games platform, is firing employees, shutting games and losing players. When warned that its third-quarter numbers would be a pre-Halloween horror, investors started thinking about the apocalypse.
The results, released after the market closed Wednesday, were not quite as bad as that, David Streitfeld reports in Thursday's New York Times. In addition, the company announced a partnership to offer online casino games in Britain where gamblers can wager real money. Such games, which have been banned in the United States, are promoted as highly profitable.
Third-quarter revenue was $317 million, an improvement over the $300 million to $305 million the company forecast in early October when it warned that tough times were ahead. The number was also significantly higher than the $256 million that downbeat analysts had expected. But revenue was only 3 percent better than 2011.
Still, the stock immediately spiked, and was up 13 percent in morning trading at $2.40. Zynga shares are down 75 percent from their public offering price last December, and have dropped even more from the level at which executives and early investors cashed out last spring in an unusual $500 million secondary offering.
“In less than 10 months, Zynga has gone from a massive global growth story to a cost-cutting restructuring story,†said Richard Greenfield, an analyst at BTIG Research. “How did the rug get pulled out from under them so fast? It still amazes us.â€
Mr. Greenfield pointed to a new Zynga game, the Ville, in which players create the home of their dreams. In an economy in which hardly anyone can afford to do this in real life, Zynga had high hopes some players would spend money to do it virtually. The Ville was introduced in June and had 7.3 million daily users at the end of July. Today: 1.7 million.
“The decay curve, the half-life, is shortening,†Mr. Greenfield said. “It's staggering how fast some of these games have fallen off.â€
